2025 has so far been a terrific year for the FTSE 100. The UK’s flagship index has already climbed over 8% since January, and when counting dividends, the total return is firmly above 10%. Yet according to the analyst team at UBS, there’s still more growth potential on the horizon.
Right now, the Swiss bank projects that, under the right conditions, Britain’s large-cap index could rise all the way to 9,800 by the end of this year. That’s another 10% gain from current levels. And providing that dividends continue to flow, this outcome would put the full-year total return above 20%, almost three times what the index usually delivers!
Investigating the forecast
It’s important to note that 9,800 points is the most optimistic outlook. And there are several conditions that must be met for this to become a reality, according to UBS. The three most prominent are:
- Higher commodity prices since these represent around a quarter of FTSE 100 company earnings.
- Improved international growth since most FTSE 100 earnings come from overseas.
- A weaker pound sterling to improve conversion rates from foreign currencies.
The first condition seems to be moving in the right direction. Sadly, with disruptive US tariff policy, the latter two are proving more elusive, with global GDP growth slowing, and a weaker US dollar pushing up the value of the UK pound.
Unless the macroeconomic and trade landscape suddenly starts improving, I think UBS’s forecast might be a bit too optimistic. However, that doesn’t mean there won’t be further growth on the horizon. And with plenty of FTSE 100 stocks looking cheap, there are still plenty of growth opportunities to explore.
Potential winners?
Given that commodity prices are rising, it’s not too surprising that UBS has two FTSE mining stocks on its Buy list right now. Specifically, the bank is bullish on Anglo American (LSE:AAL) and Glencore (LSE:GLEN) with share price targets that represent a potential 22.5% and 68.3% gain, respectively.
The bull case for each business is a little complicated. But in oversimplified terms, both companies have a favourable product mix set to benefit from higher commodity prices, particularly copper. In fact, Glencore is responsible for 5% of the global copper supply. And with a 50% copper tariff being announced by the US, the price has already increased by 36% since the start of the year.
Given that copper is essential for both traditional and modern energy infrastructure, both companies are likely to see their earnings surge. After all, mining incurs mostly fixed costs. And historically, large jumps in mining profits are usually followed by impressive share buyback programmes or special dividends.
However, even with this impressive growth potential, there are risks to consider. Anglo American is in the middle of a restructuring programme that adds considerable execution risk. Meanwhile, Glencore remains highly exposed to thermal and metallurgical coal price volatility, both of which are underperforming right now.
At the same time, while the US tariffs have been a helping hand in hiking metal prices, the subsequent disruption to manufacturing operations could wreak havoc on demand. And if supply continues to grow, the recent gains in commodity prices could reverse. Nevertheless, given the impressive growth potential, I think these FTSE 100 stocks are worthy of closer inspection.
